October 13, 2006

 

CBOT Corn Review on Thursday: Sharply higher after USDA data

 

 

Chicago Board of Trade corn futures settled sharply higher Thursday but off limit-up levels reached earlier in the session as lower-than-expected production and stocks data from the U.S. Department of Agriculture helped push prices higher.

 

December corn jumped 14 1/4 cents to US$2.98 1/4 cents per bushel, and March also gained 14 1/4 cents to US$3.08 1/4. E-CBOT day-session volume in December was 73,386 contracts. Several months set new-life-of contracts in Thursday's trade.

 

"The USDA reports released Thursday were fundamentally very constructive," said Randy Mittelstaedt, analyst with R.J. O'Brien in Chicago. Corn is readjusting to a new value level. Recent market volatility has caught people off guard, with wheat in particular influencing the other markets, he said.

 

Up until now the market was expecting the 2006-07 carryout between 1.2-1.4 billion bushels, which didn't really justify US$3 corn. However, with the 2006-07 carryout under 1 billion bushels, corn got the justification it needed, he noted.

 

The USDA estimated U.S. 2006-07 corn production at 10.905 billion bushels, below the 11.114 estimated by the USDA in August as well as the 11.144 average analyst estimate.

 

The USDA pegged the 2006-07 corn yield at 153.5, below the 154.7 estimated in September, and the average analyst estimate of 155.2.

 

2006-07 ending stocks were pegged at 996 million bushels, down 224 million bushels from the September report and well below the average trade guess of 1.207 billion.

 

In the supply-demand balance sheet, USDA decreased feed and residual use by 25 million bushels, reflecting higher prices and the smaller crop.

 

The USDA raised China's corn production by three million metric tonnes to 141 million, and reduced 2006-07 world corn ending stocks to 89.54 million metric tonnes from 92.3 million in September.

 

Speculative buying added to the gains, with commodity fund buying estimated at 20,000 contracts, sources said.

 

On open-auction technical charts, December gapped open higher and remained well above its major moving averages.

 

December's 14-day relative strength index stands at 70.52. A reading above 70.0 denotes overbought levels and a reading below 35.0 indicates oversold conditions.

 

Buyers on Thursday included Tenco, which bought 8,000 December and 1,400 July; JP Morgan, which bought 1,000 December and 1,000 March; Term, which bought 1,000 March; RJ O'Brien, which bought 1,000 December and 500 July; and Rand Financial, which bought 3,500 July as part of a corn-wheat spread.

 

JP Morgan sold 3,000 March and 1,500 July, Calyon sold 2,300 December, ABN Amro sold 1,000 December and Fimat sold 500 December and 400 July.

 

In spread trading, JP Morgan bought 4,000 March-December.

 

In options trading JP Morgan sold 2,000 December 2007 December US$3.70 calls.

 

Oat futures settled higher as fund and spillover buying from corn pushed prices higher, floor traders said. Several contracts made new life-of-contract highs.

 

December oats gained 8 3/4 cents to US$2.40 1/4 per bushel and March rose 8 1/2 cents to US$2.45.

 

Ethanol futures ended mixed in thin activity. November ethanol did not trade and settled unchanged at US$1.85 per gallon, and December, which also did not trade, rose 5 cents to US$1.85.

 

On Friday, the USDA is scheduled to release the weekly export sales report for the week ending Oct. 5 at 7:30 a.m. CDT. Analysts expect sales between 800,000-1.0 million metric tonnes. Sales last week totaled 1.158 million tonnes.